Oando says it needs more funding to complete Conoco deal

4/14/2013

Oando says it needs more funding to complete Conoco deal

BY SARAH KENT

LONDON -- Oando Energy Resources faces a funding shortfall as it attempts to conclude a planned $1.79 billion acquisition of ConocoPhillips's Nigerian assets, a financial statement on the firm's website showed.

Shell and Total have in recent years sought to sell off some of their older Nigerian assets, with ambitious local players eager buyers. Snapping up ConocoPhillips's Nigerian fields in December looked to be a major coup for Oando.

However, borrowing more money to finance the deal could put a strain on the company's finances, it warned, throwing doubt on its ability to see through the acquisition.

Oando, which has already raised a number of loans to pay a $435 million deposit to ConocoPhillips, said it plans to issue a mix of shares and debt to complete the takeover, even as its accounts showed it lost $284 million in 2012.

"In addition to its on-going working capital requirements, the company must secure sufficient funding for existing commitments including the remaining $1.565 billion of purchase consideration owing in connection with the acquisition of the ConocoPhillips operations in Nigeria" said the statement, which was audited by accounting firm PricewaterhouseCoopers.

"These circumstances lend significant doubt as to the ability of the company to meet its obligations as they come due" said Oando's statement.

Most of the money for the deposit came in the form of a $345 million convertible loan from its parent company, Oando PLC, which owns almost 95% of Oando Energy Resource's shares.

Oando said that despite the current funding shortfall, it was confident its subsidiary would raise enough money to buy the oil fields.

"There's no doubts whatsoever that the money would be raised in a timely fashion" Meka Olowola, Head of corporate communications at Oando PLC, said in an emailed statement.

In addition to issuing more shares, Oando Energy Resources is also seeking to raise $800 million of senior secured loans to be provided by a syndicate of international and Nigerian banks.

Oando Energy Resources CEO Pade Durotoye said earlier this month he expected the deal to be concluded by September.

"Our focus over the last couple of weeks has been trying to knock down the debt...we're making very significant progress and we are preparing for the equity, we expect that to be done somewhere in the region of June and we expect to be coming up with more specific information concerning that equity plan to the market very shortly" said Mr. Durotoye, who had been speaking to analysts on a conference call.

ConocoPhillips said, "We have no further update at this time on the disposition of our Nigerian business, which we expect to close in 2013."

The acquisition of ConocoPhillips's Nigerian assets would give Oando Energy Resources access to average production of about 43,000 boepd and proved reserves of roughly 213 MMboe.

ConocoPhillips is in the midst of a three year repositioning plan aimed at improving its balance sheet and focusing on more profitable, less risky unconventional fields in North Dakota, Texas and other plays throughout North America.